Lego

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Sometimes a CEO’s most challenging leadership transition is not a matter of switching jobs but of guiding the company onto a new path. Jørgen Vig Knudstorp, a former McKinsey consultant who came to the family-owned Lego Group as an outsider in 2001 and was named CEO in 2004, learned that a series of distinct leadership approaches was needed as he moved the 76-year-old Danish toy maker onto a firmer financial footing, reoriented it toward growth, and opened it to ideas from enthusiastic users.

What leadership approach did you apply to pull Lego back from the brink?

By 2004, when I became CEO, things had gone awfully wrong at Lego Group. To survive, the company needed to halt a sales decline, reduce debt, and focus on cash flow. It was a classic turnaround, and it required tight fiscal control and top-down management. At the same time, I had to build credibility. You can make a lot of things happen if you are viewed without suspicion, so I made sure I was approachable. In Danish, we have an expression that literally translates as “managing at eye level,” but it means being able to talk to people on the factory floor, to engineers, to marketers—being at home with everyone.

And then how did your leadership approach change?

Once the company had gained the freedom to live and have a strategy, the management team set out to optimize the firm’s value. In order to do that, we had to ask, Why does Lego Group exist? Ultimately, we determined the answer: to offer our core products, whose unique design helps children learn systematic, creative problem solving—a crucial twenty-first-century skill. We also decided that we wanted to compete not by being the biggest but by being the best. Implementing a strategy of niche differentiation and excellence required a looser structure and a relaxation of the top-down management style we had imposed during the turnaround because the company needed empowered managers. For example, I stopped participating in weekly...
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